Treasuries Having Harder Time Finding A Good Home

It was inevitable.  You can't spray the world with an endless supply of something and not expect an adverse price effect.  The U.S. has been living on borrowed time, but now our bonds are looking square in the eye of the "Grim Reefer".  Country after country has either drastically curtailed buying our debt, stopped buying our debt altogether, or is looking for ways to offload it on someone else.

It's utterly amazing that nothing has happened... yet!  Now, the over-supply is creating a saturation in the market place, whose consequences have yet to be felt.  Another week, another financial problem.  That's what happens in a BEAR market:  whatever CAN go wrong, WILL go wrong!

For more than a year, analysts have been warning that record-sized debt sales by the U.S Treasury were utterly inconsistent with a 10-year yield below 4%.  This past week, the yield on 10-year notes jumped from 3.65% to as high as 3.92% on Thursday.  On Friday, it was 3.87%.

Tame "reported" inflation, rising unemployment, the housing market slump, the Federal Reserve’s policy of a virtually zero Fed Funds rate and its purchase of up to $1.7 trillion in bonds have all helped keep Treasury yields near historic lows.

But, this week the mood sharply deteriorated as yields for $118 billion of newly-issued U.S. debt were much higher than forecast, sparking overall selling of Treasuries.  Sentiment also deteriorated in the U.K. bond market after the government’s proposed budget failed to resolve doubts over future spending and debt reduction.

It hasn’t helped that the U.S. announced a big overhaul of its healthcare system this month, adding to worries about the scale of U.S. spending.  Thank you Obamacare! (sarcasm intentional!)

Also un-nerving U.S. investors this week was a report by the Congressional Budget Office that falling payroll taxes, resulting from high unemployment, means that Social Security will pay out more in benefits than it receives for this fiscal year.

“A sustained rise in yields is upon us and bond funds will start to incur losses,” says Jim Caron, Global Head Of Interest Rate Strategy at Morgan Stanley.  He expects 10-year yields to reach 4.5% in the second quarter, as investors pull their money from bond funds.  March looms as the first month for negative returns for investors in Treasuries this year.   Year-to-date, Treasuries have returned a scant 0.7% and threaten to slip into negative territory.

The 10-year note’s yield rose 15 basis points, or 0.15% , to 3.85%, according to BGCantor Market Data. The price of the 3.625% note due in February 2020 fell  $12.19 per $1,000 face amount.

The increase in the yield was the biggest since an advance of 0.27% for the week that ended Dec. 25.  The yield touched 3.92%  on March 25, the highest level since June 11.  The two-year note’s yield rose 0.05% to 1.04% and reached 1.12%  this week, the highest level since Jan. 4.

Unfortunately, the unsatiable appetite to fund America's bloated budget can only get worse.  The world has had it with our fiscal irresponsibility and the era of low interest rates will become harder to sustain. 

Marko's Take

For new readers, please visit us on YouTube at http://www.youtube.com/markostaketv.  Our newest episode on the legality of the Personal Income Tax will be posted in the next two days.

Obamacare Making Corporate America Sick

A few months ago, we did a 3-part in-depth analysis of Obamacare.  If you find the issue complex and hard-to-fully understand, "Extra, extra, read all about it!' by clicking the following series of links: (http://markostake.blogspot.com/2009/12/obamacare-part-1-whos-fer-it-whos-agin.html), (http://markostake.blogspot.com/2009/12/obamacare-part-2-when-us-gets-involved.html) and (http://markostake.blogspot.com/2009/12/obamacare-part-3-economic-reality.html).

I've maintained all along, and will continue to insist, that this ill-conceived piece of legislation will NEVER be enacted, unless preceeded by the complete suspension of civil rights and is MANDATED by some sort of executive order.  America not only does not want it, 36 states are suing to ENJOIN it!

This is probably the most incredible act of political suicide I think I've ever seen.  Any one voting "yea" will be voting either himself, or herself, out of office in 2010.  If you know a congressperson, send a subscription to "Marko's Take" will ya?   It's free and they might learn something!

It's been a humungously "successful" week for Democrats.  Obamacare passed Congress in its final form on Thursday night and the dividends are already being realized.  Yesterday AT&T announced that it will be forced to make a $1 billion writedown due solely to the health bill in what has become a wave of such corporate losses.

This utter unabated destruction of wealth and capital came with more than ample warning.

Using their well-lubed "spin machine" to make this new entitlement look affordable under Washington, D.C. accounting conventions, Democrats decided to raise taxes on companies that do the public service of offering prescription drug benefits to their retirees instead of dumping them into Medicare.   Democrats waved off objections from Corporate America as self-serving or "political."

Of course, Democrats are acting only in the interest of "average Americans" (sarcasm intentional!).

On top of AT&T's $1 billion, the political wrecking ball so far includes Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, up to $20 million! Verizon has also warned its employees about its new higher health-care costs - and there will be many more in the coming days and weeks.

John DiStaso, of the New Hampshire Union Leader, reported this week that Obamacare could cost the Granite State's major ski resorts as much as $1 million in fines, because they hire large numbers of seasonal workers without offering health benefits. "The choices are pretty clear, either increase prices or cut costs, which could mean hiring fewer workers next winter," he wrote.

All this in two days?  Thank God we have Obamacare, since I, and the rest of America are about to get pretty damn sick.

Think I'm being unfair to the "well-intentioned" and "non-political" Democratic Party, our President or the Obamacare at large?  TAKE ME ON!

Marko's Take

We will be posting our next YouTube video on the legality of the Personal Income Tax in the next couple of days.  If you haven't seen some of our video blogs, we hope you take a minute to check us out at http://www.youtube.com/markostake.com.

10 For 10: 10 Predictions For 2010

Every pundit puts out an annual list of what to look for in the upcoming year.  Most do so in either late December or very early January.  It's now this pundit's turn to give his "Take".

In no particular order of importance, I expect to see the following:

1.  The economy, currently in "recovery" mode, will start to sputter by no later than the middle of the second quarter, and will cascade lower into the end of the year (http://markostake.blogspot.com/2009/12/recovery-recession-or-depression.html).

2.  Residential home prices wll RISE through 2010 (http://markostake.blogspot.com/2010/01/bottom-in-real-estate.html).

3.  Commercial real estate collapses, led by closures of strip malls and the failure of small businesses (http://markostake.blogspot.com/2009/11/small-business-failures-leading.html).

4.  Stocks RISE in 2011 (http://markostake.blogspot.com/2010/01/why-does-stock-market-act-like.html).

5.  Republicans take the House and the Senate.

6.  Interest rates will remain low throughout the year (http://markostake.blogspot.com/2010/01/have-any-interest-in-future-direction.html).

7.  Some version of a "Windfall Profits Tax" gets enacted on oil companies.

8.  Obamacare does NOT pass in anything close to its current form, unless via executive mandate (http://markostake.blogspot.com/2009/12/obamacare-part-1-whos-fer-it-whos-agin.html), (http://markostake.blogspot.com/2009/12/obamacare-part-2-when-us-gets-involved.html),
(http://markostake.blogspot.com/2009/12/obamacare-part-3-economic-reality.html).

9.  Shortages of necessities such as food, water, gasoline and other staples will lead to unprecedented civil disobedience and riots.

10. Gold will reach something in the order of $5,000 and Silver $250 per ounce by the end of the year or early 2011.

11.  I will make an 11th prediction:  The U.S. Dollar will be virtually, if not entirely relegated to second-tier status.

As you can tell from the 11th prediction, at least one of my forecasts came true.  I did indeed make an 11th prediction! 

You didn't think I'd take a chance on going 0 for 10 did you?

Thanks for reading!  If you have some predictions of your own or think I missed mentioning one, you know what to do:  TAKE ME ON!

Marko's Take

Obamacare... Part 3: The Economic Reality

Former Senator Phil Gramm said it best:  "You can't give someone something for nothing unless you give someone nothing for something".  And so it is with the notion of universal health care.

First, lets look at what the Obama Administration's own Congressional Budget Office (CBO) projects.  Beginning with passage and continuing through 2019, the additional fees are virtually offset by the benefits, resulting in a picture perfect pay-as-you-go outcome. 

However, the CBO is notorious for its bias in matters of projecting finances, be it spending, deficits or anything else.  As an arm of the administration, it is a virtual certainty that some sort of accounting shenanigans have been played in order to "sell" the program to the 60 Senators who extorted the Admistration for various favors in exchage for their YES votes.

According to a recent article in the Wall Street Journal, the plan's most tangible efforts to restrain medical costs occur via restrictions on specialist physicians.  Congress will constrain these doctors from employing various "costly" procedures which it has deemed wasteful.  But who are we to argue with Congress?  They must be right since so many of them are doctors and have NO intention of participating in the plan!

The Senate bill gives the Centers for Medicare and Medicaid Services the unilateral right to dictate the price and use of medical devices.  The Obama administration has attempted to usurp these powers via the court system and LOST (Hays vs Sebelius)!

Furthermore, the Senate bill specifically denies  patients the right to sue!  Private providers, on the other hand, are held to an entirely different standard.

If for some reason you wish to review the entire plan, you can do so by clicking on the following link http://thomas.loc.gov/.  Or, for general information about health reform, http://voices.washingtonpost.com/ezra-klein/health_reform/.


So, whether you find my little diatribe brilliant or idiotic, I DOUBLE-DARE you to "Take Me On" in the comments section below. Tomorrow, we'll revisit Gold.

Marko's Take

Obamacare... Part 2: When The U.S. Gets Involved In Medicine

By now you're sick of hearing the words "swine flu".  But, unless you're old enough, you may not realize that a form of swine flu threatened the world in 1976 in the last year of the Ford Administration.  That swine flu first showed up in February of that year, when Private David Lewis at Fort Dix died of a form of severe influenza not seen since the plague of 1918-19.  That plague took 500,000 American lives and 20 million people worldwide.

Within two weeks, an additional 500 soldiers had been stricken with swine flu, although none of them died. However, officials realized that any flu capable of spreading so quickly had the makings of a bona-fide pandemic.  Pvt. Lewis was the ONLY person to actually die from swine flu in 1976, but the quickly developed vaccination killed HUNDREDS of Americans, despite a cost of $135 million.

To be fair to President Ford, he was in a no-win situation.  Had he NOT acted he would surely have been held accountable for any mass deaths.  By the end of the year, the vaccine had been administered to 220 million Americans.  As Jimmy Carter assumed the Presidency, reports began to surface of the vaccination's many side effects, including neurological problems. 

Joseph Califano, one of the earliest to use the word "fiasco" in describing the swine flu situation, later came to the conclusion that it was unavoidable.  Califano, who President Carter appointed Secretary of Health, Education and Welfare, admitted that the doctors had no choice but to err on the side of caution.

Since the 1976 caper, things have become much more complex.  The Obamacare bill itself is approximately 2000 pages and was written in 17 days!  Senator Harry Reid himself has added an ADDITIONAL 383 pages to an already bloated bill loaded with pork for EVERY Senator voting for it.  One example is $100 million for Senator Chris Dodd's favorite hospital.

According to the Bureau of Labor and Statistics, healthcare provided 14.3 million jobs in 2008 and 10 of the largest 20 occupations are healthcare related.  It's expected to generate an additional 3.2 million jobs between 2008 and 2010, more than any other industry, primarily the result of an increasingly elderly population.

So, now we know that our government's experience with healthcare is poor and the industry is huge and getting bigger.  We know that Obamacare is massive, incomprehensible to virtually anyone and loaded with pork in order to get the 60 Senate votes.  

The whole situation reminds me of a great commercial decrying drug abuse:  This is your head (looking at a raw egg).  This is your head on drugs (looking at the eggs being scrambled in a frying pan).  Any questions?

I'll cover some of the economics of Obamacare tomorrow.  Please "Take Me On" in the Comments section below.

Marko's Take

Obamacare... Part 1: Who's Fer It, Who's Agin' It?

The Senate version of Obamacare passed on Christmas Eve by a 60-39 vote, completely along party lines.  Thank God, President Obama has managed to UNITE the country as he promised while campaigning! Ninety-two year old Democratic Senator Robert Byrd, (presumably along with his dog, Billy), had to be wheeled in to vote, while Republican Senator Jim Bunning of Kentucky refused to vote at all!

Proponents will be easier to enumerate, so let's start there first.  They include the administration and the 60 Democrats in the Senate.  And, of course, most of the House of Representatives, led by Nancy Pelosi.  This is, of course, PREPOSTEROUS, since NONE of the provisions of Obamacare will apply to any of them! 

As to the opponents, the list gets a bit more extensive.  Among the nays include the American People, who, according to the most recent Rasmussen poll, oppose Obamacare  by 55%, with only 41% in favor.  This poll was conducted less than a week ago.  Therefore, Obamacare should prove VERY UNHEALTHY for Democrats seeking re-election in 2010!

Other opponents include Big Pharma and the AARP.  Big Labor opposes Obamacare, too, because of the 40% excise tax it levies on so called "Cadillac Plans", the portion of existing health-care plans that are very lavish, such as the ones enjoyed by many unions and Congress.  Oh yes, that excise tax applies to everyone BUT CONGRESS!

On the 23rd of December, one congressman, Democrat Parker Griffith of Alabama, switched parties BECAUSE of his opposition to Obamacare.  Prior to running for Congress, Griffith was an oncologist.  He opposes the bill because of the impact on doctors and quality of patient care.  But what does he know.  It's not like he was a doctor!  Republican's haven't held this seat since the Civil War!

Before the bill is enacted, it must be first reconciled between the House and Senate versions, which is expected to take place in February.

Now that we know how the sides line up, we'll continue tomorrow with another aspect of Obamacare.

I hope you had a Merry Christmas.  I did.  "Take me on" with any comments below.

Marko's Take